Lesson 1 of 15
What is an LLC?
A limited liability company is a business entity created under state law. Once the state accepts your filing, the company exists as something legally separate from you.
What the structure gives you
The core benefit is limited liability. If the business is sued or cannot pay a debt, creditors generally pursue the company's assets, not the owner's house, car or personal savings.
An LLC is also flexible. Owners, called members, can split profits in ways that do not have to match ownership percentages, and the company can choose between several federal tax treatments.
- Separate legal existence from its owners
- Limited liability for members in most situations
- Flexible management: member managed or manager managed
- Flexible federal tax treatment
- Fewer formal meeting and record requirements than a corporation
What an LLC does not do
An LLC does not protect you from your own negligence or wrongdoing, from debts you personally guarantee, or from unpaid payroll taxes you were responsible for.
It also does not create tax exemption. Unless you elect otherwise, profits are taxed on the owners' personal returns.
Courts can disregard the separation if the company is treated as a personal wallet. Keeping business and personal money apart is not optional paperwork, it is what makes the protection hold.
How it compares
A sole proprietorship needs no filing but offers no liability separation. A corporation offers separation but comes with directors, bylaws, share issuance and stricter formalities. An LLC sits in between and suits most small and medium businesses.
Key takeaways
- An LLC is created by a state filing, not by using a business name.
- The main benefit is limited liability, not tax savings.
- Protection depends on keeping the company genuinely separate from you.
Frequently asked questions
Is an LLC a corporation?
No. It is a separate structure created by state law. It can, however, choose to be taxed as a corporation.
Can one person own an LLC?
Yes. A single-member LLC is allowed in every state.
Prefer to have someone handle the filing?
You can file directly with the state using the steps above. If you would rather have Gullia Filing prepare and file your formation documents, run the name check and act as your registered agent, we handle the process end to end.